There are many, many, different types of mortgages available to people in the UK. For instance; discount mortgages, capped-rate mortgages, help to buy mortgages, just to name a few… But, in this article, we’re going to focus on the Offset Mortgage.
So, what is an Offset Mortgage?
An offset mortgage is a type of mortgage that is linked to one of your savings accounts you currently have open with that bank or building society. The money in that account can be used to lower the total interest ’ll be charged on your repayments each month.
How does an Offset Mortgage work?
The way this works is by having your savings ‘offset’ against the value of your mortgage, so you’ll only pay interest on your mortgage balance minus your savings balance. Your savings don’t actually repay any of your mortgage, they just sit alongside it and save you interest.
Can you show us an example of how this works?
Of course!
Let’s say you have a mortgage of £200,000 and your interest rate is 3%, and you have £20,000 in your savings. By ‘offsetting’ the £20,000 you have in your savings, you’ll only be paying interest on the £180,000 of your mortgage, instead of the full £200,000.
Are there any disadvantages to choosing an Offset Mortgage?
There are certainly some disadvantages to an Offset Mortgage that you’ll want to consider:
- Interest rates can be higher with offset mortgages. If you have a bigger deposit, you might be able to pay less each month.
- You may want to use your savings to pay for a bigger deposit instead.
- Your savings won’t earn any interest if they are used for an offset mortgage.
Luckily for you, our team of fully qualified mortgage advisers are always on hand to give you the best advice throughout the whole process.
We’ll be on hand to help you every step of the way in obtaining a new mortgage, and our service won’t cost you a penny when you go via our online portal. Visit our website today and obtain a quick quote with our online mortgage rate tool to see how much you could save on your next mortgage.
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PLEASE NOTE: Article written 29th September 2022. Information contained within this article is likely to change and therefore should not be relied upon or form part of any form of decision making without seeking professional advice. *
YOUR HOME MAY BE REPOSSESSED IF YOU DON’T KEEP UP REPAYMENTS ON YOUR MORTGAGE
Any guidance and/or advice contained within this document is subject to the UK regulatory regime and is therefore restricted to consumers based in the UK. Any technical or regulatory information contained within this document was correct at the time of producing it but as it may be subject to change it should not be exclusively relied upon when making a financial decision. The Financial Conduct Authority does not regulate advice on Buy to Let mortgages.
Article written: September 2022 290922 MZ000259
